(Bloomberg View) -- Data.

Here's a keynote speech that Commissioner Kara Stein of the Securities and Exchange Commission gave to the "Big Data in Finance Conference" last week, titled "A Vision for Data at the SEC."

It's about how the SEC does and should use data to catch crimes and prevent crashes and so forth. But it seems to me that Stein raises and then passes over the most interesting questions: The securities laws, in large part, can be understood as a set of rules about information.

What information is useful for public dissemination? How should we ensure that it is accurate and reliable? Does fairness require everyone to have the information at the same time? How do you protect nonpublic information? What information is necessary for price discovery? The federal securities laws speak to all of these questions.

In this sense, “big data” is a continuation of an old theme. In another sense, the developments in data over the last 10 to 15 years represent a wholly new phenomenon, in the same way that satellite imaging is completely different from surveying a landscape from the top of a hill. At that scale, patterns become evident that would have been impossible to piece together by considering one plot at a time.

The way I like to think about this is: If I know that my company is about to be acquired by another company at a 50 percent premium, and no one else knows that, then that is Information with a capital I. It is obviously useful, and it would be equally useful to everyone. It is what the securities laws call "material" information. And the federal securities laws speak to a bunch of questions -- Stein's questions -- about that information.

There are rules about when the company has to disclose it publicly (Form 8-K, etc.); there are rules prohibiting the company from disclosing it selectively (Regulation FD); there are rules about who can trade on it before it's disclosed (insider trading). There is a whole structure of securities law built up around the idea that you will know materiality when you see it.

What is interesting about "big data" is how it has changed what information is useful, and to which investors. In the old days, if a company knew that sales were up across all its stores nationwide, that would be Information, and we'd know what to do with it. If an investor went to one store, sat in the parking lot, and noticed that a lot of people were going in, that would be an interesting data point -- it might inform a hunch that sales were going up -- but it would not be of any particular interest to anyone beyond that investor.

But now investors can look at satellite images of all of the parking lots of all of the company's stores, every day -- or just have their computers look at the pictures and count the cars -- and get a much better sense of how sales are going. Of course not every investor can do that; you need the satellites, and the computers.

Stein's speech never uses the word "material," but it seems to me that the interesting questions for the securities laws in the age of big data will involve figuring out what materiality means.

Which forms of tiny incremental advantage -- co-location at the stock exchange, slightly faster access to news releases, electronic surveys of stock analysts -- matter, and how do we decide which are fair? If every piece of data can be useful to some investor somewhere -- if it can give that investor's model the tiny incremental advantage that it needs -- then how do we decide what is material? And if everything is material, how do the answers to Stein's questions change?

Elsewhere, "the Analysis and Detection Center of the SEC's Market Abuse Unit culls through billions of rows of trading data going back 15 years to identify individuals who have made ahead of corporate news."

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